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Russian Air Space For Sale

Foreign airlines using Russia's air corridors annually pay between $350 and $500 million, according to various estimates. Many of them deliberately reduce their flights across Russia's territory, because the fee is calculated for every 100 kilometers. Many foreign jets headed for Asia prefer turning southeast to Kazakhstan and Uzbekistan which charge no transit fees.
by Maxim Krans
Moscow (RIA Novosti) Nov 06, 2007
The fact that German Lufthansa's Russia-based subsidiary has stopped using Russian air corridors for transit flights may aggravate tensions between Russia and the European Union. It is clear that we are in for a "transit war." Germany's air traffic regulator has issued a temporary ban for Aeroflot-Cargo's freight jets to land in the cargo hub near Frankfurt; this followed a hike in transit tariffs for foreign air carriers in Russia on November 1.

Russia is the only country that charges a fee for using its air space. Other countries charge foreign airlines fees for using its air traffic control and weather services, but Russia also charges a transit fee above that.

This practice dates back to the 1960s, when Russia opened the so-called trans-Siberian air route to foreign airlines. Initially, foreign passenger jets had to land in Moscow for refueling en route from Europe to Asia. Later, when modern long-haul aircraft were designed, they began to make non-stop flights, paying huge fees to Aeroflot, Russia's only air carrier at the time, for the passage. They never complained because it was still cheaper than the alternative route bypassing the Soviet territory.

In the 1990s, Aeroflot, which was once the world's second largest airline, began to cede its leading positions. Its air traffic decreased by a large margin, which freed part of the corridors on the trans-Siberian route. Russian air officials then had an idea to sell additional air passages to foreign air carriers, who again agreed without complaint because payments for "the Russian air" were still lower than the cost of fuel which a bypass flight would require.

Foreign airlines using Russia's air corridors annually pay between $350 and $500 million, according to various estimates. Many of them deliberately reduce their flights across Russia's territory, because the fee is calculated for every 100 kilometers. Many foreign jets headed for Asia prefer turning southeast to Kazakhstan and Uzbekistan which charge no transit fees.

Aeroflot does not keep all of the money, of course. Part of it goes to the numerous air transport authorities and to the federal government as taxes. Two more Russian airlines, Transaero and Volga-Dnepr, have also been receiving small parts of the passage fees lately. Still, experts maintain that, without this additional income, the state air carrier would find it hard to compete with other airlines.

Russia and the EU have been haggling over additional payments for a few years now. The European Parliament demanded that they be cancelled in a report on the upcoming conclusion of a Russia-EU air services agreement. Russia, in turn, insists that the money is spent on modernizing the air transport infrastructure, in which foreign companies should be just as interested. The EU thinks that the money is really spent on subsidizing Russian carriers.

This unfriendly exchange has become an almost insurmountable barrier to Russia's WTO entry. Later, however, experts managed to find a compromise solution, which envisaged a gradual cancellation of the payments until 2013. Russia has not yet ratified the agreement, though. The EU insists on speeding up the process, while Russia's Transport Minister Igor Levitin holds on to his position saying that the transit and air traffic control taxes will be charged in the future as well. He said at the 36th Assembly of the International Civil Aviation Organization (ICAO) in September that the air traffic control tax would be raised to 8.3% from November 1, a second rise this year.

However, the ministry's position with regard to Lufthansa Cargo does not seem logical. The ministry said the agreement on the German company's operation in Russia expired on October 27. The company responded that it had requested an extension within the deadline, but it was declined, according to Berliner Zeitung. Why couldn't the Russian ministry, which is directly interested in preserving the passage tax, reach an agreement with its partners?

Meanwhile, as the story goes, the trans-Siberian air route is vacated once again. Russia's Federal Air Transportation Agency said air traffic on that route plunged 11% last year.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Source: RIA Novosti

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China To Rule The World Economy
Moscow (RIA Novosti) Nov 06, 2007
The China-Russia Friendship Year is finishing early this month with great pageantry. Economic contacts underlying the galas are asymmetrical-Russia has silently accepted the role of China's sales outlet and raw material supplier. The two countries' political and business leaders are gathering in Moscow, November 6, for a second bilateral economic forum to take stock of mutual interests. Chinese interests are clear as it is, while Russian are based on China's advance to the world economic stage.







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